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Price Dispersion on the Internet: Good Firms and Bad Firms

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Author Info
Kathy Baylis (University of California, Berkeley)
Jeffrey Perloff (University of California, Berkeley)

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Abstract

Internet firms charge a wide range of prices for such homogeneous products, and high-priced firms remain high-priced and low-priced firms remain low-priced over long periods. One explanation is that high-price firms are charging a premium for superior service. An alternative explanation is that firms price discriminate across informed and uniformed consumers (Salop and Stiglitz 1977) or between serious shoppers and others (Wilde and Schwartz 1979). The pricing pattern for a digital camera and a flatbed scanner is consistent with the price-discrimination model and inconsistent with the service-premium story.

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Publisher Info
Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number 1019.

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Date of creation: 01 Sep 2001
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Handle: RePEc:cdl:indrel:1019

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Wilde, Louis L & Schwartz, Alan, 1979. "Equilibrium Comparison Shopping," Review of Economic Studies, Blackwell Publishing, vol. 46(3), pages 543-53, July. [Downloadable!] (restricted)
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  2. David, Douglas D & Holt, Charles A, 1996. "Consumer Search Costs and Market Performance," Economic Inquiry, Oxford University Press, vol. 34(1), pages 133-51, January.
  3. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July. [Downloadable!] (restricted)
  4. Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers 94, Board of Governors of the Federal Reserve System (U.S.).
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  5. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April. [Downloadable!] (restricted)
  6. Sobel, Joel, 1984. "The Timing of Sales," Review of Economic Studies, Blackwell Publishing, vol. 51(3), pages 353-68, July. [Downloadable!] (restricted)
  7. Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring. [Downloadable!] (restricted)
  8. Stahl, Dale O., 1996. "Oligopolistic pricing with heterogeneous consumer search," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 243-268. [Downloadable!] (restricted)
  9. Conlisk, John & Gerstner, Eitan & Sobel, Joel, 1984. "Cyclic Pricing by a Durable Goods Monopolist," The Quarterly Journal of Economics, MIT Press, vol. 99(3), pages 489-505, August. [Downloadable!] (restricted)
  10. Arnold, Michael A, 2000. "Costly Search, Capacity Constraints, and Bertrand Equilibrium Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 117-31, February.
  11. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September. [Downloadable!] (restricted)
  12. Perloff, Jeffrey M. & Salop, Steven, 1985. "Firm-specific information, product differentiation, and industry equilibrium," CUDARE Working Paper Series 154, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy, revised 1985.
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  13. Stokey, Nancy L, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 355-71, August. [Downloadable!] (restricted)
  14. Salop, Steven, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 393-406, October. [Downloadable!] (restricted)
  15. Michael Smith & Erik Brynjolfsson, 1999. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Computing in Economics and Finance 1999 1022, Society for Computational Economics.
  16. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June. [Downloadable!] (restricted)
  17. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September. [Downloadable!] (restricted)
  18. James D. Dana Jr., 1999. "Equilibrium Price Dispersion Under Demand Uncertainty: The Roles of Costly Capacity and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 632-660, Winter. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael R. Baye & John Morgan, 2005. "Red Queen Pricing Effects in E-Retail Markets," Working Papers 2005-07, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  2. Emin Dinlersoz & Han Li, 2006. "The shipping strategies of internet retailers: Evidence from internet book retailing," Quantitative Marketing and Economics, Springer, vol. 4(4), pages 407-438, December. [Downloadable!] (restricted)
  3. Zhenlin Yang & Lydia Gan & Fang-Fang Tang, 2007. "A Study of Pricing Evolution in the Online Toy Market," Economic Growth centre Working Paper Series 0704, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre. [Downloadable!]
    Other versions:
  4. Stefan W. Schmitz & Paul Peter Sint, 2003. "B2C eCommerce Strategy and Market Structure: The Survey Based Approach," Discussion Papers of DIW Berlin 323, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  5. van den Berg, Gerard J, 2005. "Revolutionary Effects of New Information Technologies," CEPR Discussion Papers 5147, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Information, Search, and Price Dispersion," Working Papers 2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  7. Jaume Rosselló Nadal & Antoni Riera Font, 2008. "Pricing on the European Mass Tourism Market: Tour Operators, Low Cost Carriers and Internet," CRE Working Papers (Documents de treball del CRE) 2008/4, Centre de Recerca Econòmica (UIB ·"Sa Nostra"). [Downloadable!]
  8. Giovanni Mastrobuoni & Wioletta Dziuda, 2005. "The Euro Changeover and Its Effects on Price Transparency, and Inflation. Mission Euro, Mission Accomplished!," International Finance 0503003, EconWPA, revised 24 May 2005. [Downloadable!]
  9. Enrico Bachis & Claudio A. Piga, 2006. "Hub Premium, Airport Dominance and Market Power in the European Airline Industry," Rivista di Politica Economica, SIPI Spa, vol. 96(5), pages 11-54, September. [Downloadable!]
    Other versions:
  10. Stefan W. Schmitz & Michael Latzer, 2002. "Competition in B2C eCommerce: Analytical Issues and Empirical Evidence," Industrial Organization 0211001, EconWPA. [Downloadable!]
  11. Häring, Julia, 2003. "Different Prices for Identical Products? : Market Efficiency and the Virtual Location in B2C E-Commerce," ZEW Discussion Papers 03-68, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  12. Michael A. Arnold & Christine Saliba, 2003. "Price Dispersion in Online Markets: The Case of College Textbooks," Working Papers 03-02, University of Delaware, Department of Economics. [Downloadable!]
  13. Michael R. Baye & John Morgan, 2005. "Brand and Price Advertising in Online Markets," Working Papers 2005-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
    Other versions:
  14. Ed Hopkins, 2006. "Price Dispersion," ESE Discussion Papers 150, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
  15. Michael R. Baye & John Morgan, 2005. "Probabilistic Patents," Microeconomics 0504004, EconWPA. [Downloadable!]
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